Building approvals and rate cut mixed news for industry

THE October 2012 Building Approvals released by the Australian Bureau of Statistics this week and the Reserve Bank of Australia's decision to reduce interest rates are mixed news for the building industry, according to Master Builders, Queensland's peak body for housing and construction.

Director of housing policy Paul Bidwell said the industry had hoped for an increase in building approvals for October to build on the upturn in August and September, which would have confirmed that the downturn was behind us.

"Unfortunately, we haven't seen those results and instead, total dwelling unit approvals fell 7% between September and October 2012 (seasonally adjusted)," Mr Bidwell said.

"We are surprised that reasonably strong economic fundamentals, such as employment and population growth, and two interest rate cuts in May and June, have not had a bigger impact on building activity levels.

"We know our industry is slowly recovering from the ten-year low point in October last year, but we had hoped for better results this month - it has certainly been a case of two steps forward and one step back.

"However, despite the poor monthly result, the figures do represent a significant jump of 25% since October 2011, and we stand by our view that the worst is past us and the housing sector is on the cusp of recovery.

"We remain confident that residential activity levels will start to improve as the year draws to a close, particularly given we are yet to see the effect of the First Home Owner Construction Grant, which commenced in September 2012.

"The RBA's decision to cut interest rates is certainly also welcome news. It is the sixth rate cut since November 2011. Although the interest rate cuts to date are not translating to increased demand for new housing, we hope the decision will go some way to bolstering consumer confidence.

"Consumer confidence continues to be a major obstacle and the latest building data demonstrate that consumer concerns about cost of living pressures, job security and the state of the economy continue to impact decisions to purchase new homes."